The Trump administration has issued an executive order to all U.S. citizens, residents and companies, banning the purchase or sale of ‘Petro’ - Venezuelan cryptocurrency, saying that Venezuelan President Nicolás Maduro introduced it to skirt US sanctions. In a separate move, the administration also slapped sanctions on four current and former senior Venezuelan officials accused of corruption and mismanagement.
Maduro first unveiled the country’s cryptocurrency in December. He said that Petro would be backed by oil and mineral reserves. But the issue is that the Venezuelan government unilaterally fixes the price of the Petro. So Maduro can say Petro tokens aren’t worth anything in a year without any consequence. In February, cash-strapped Venezuela became the first country to launch its own version of bitcoin, the petro, in a move that Nicolás Maduro celebrated as putting his country at the world’s technological forefront.
The treasury had said in January that the petro appeared to be an extension of credit to Venezuela and warned that transactions in it might violate US sanctions.
The petro is backed by Venezuela’s crude oil reserves, the largest in the world, yet it has arrived on the market as the socialist country sinks deeper into an economic crisis marked by soaring inflation and food shortages that put residents in lines for hours to buy common products.
While the government has published multiple whitepapers, it’s still unclear if Petro is based on the Ethereum blockchain or NEM blockchain. But it didn’t stop them from raising a reportedly $735 million, according to Maduro’s tweet during the pre-sale. Venezuela’s National Assembly has also deemed Petro illegal.
According to Bloomberg, the inflation rate will likely hit 13,000 percent by the end of 2018. The destabilized economy has created a humanitarian disaster and the oil-backed cryptocurrency reportedly hasn’t helped matters — despite Maduro’s claims to the contrary.
Bitcoin and other digital tokens are already widely used in Venezuela as a hedge against hyperinflation and an easy-to-use mechanism for paying for everything from doctor visits to honeymoons in a country where obtaining hard currency requires transactions in the illegal black market.
The government has promised that Venezuelans will be able to use the $60 coins to pay taxes and for public services. But with the Venezuelan minimum wage hovering around $3 a month, it is unlikely citizens will buy in large amounts.
“President Maduro decimated the Venezuelan economy and spurred a humanitarian crisis. Instead of correcting course to avoid further catastrophe, the Maduro regime is attempting to circumvent sanctions through the Petro digital currency — a ploy that Venezuela’s democratically elected National Assembly has denounced and Treasury has cautioned U.S. persons to avoid,” U.S. Treasury Secretary Steve Mnuchin said.
Experts in cryptocurrency regulation say that Trump’s ban is a predictable move. “While Venezuela’s attempt to issue a cryptocurrency is novel, there’s nothing new about the US restricting financial dealings with sanctioned countries,” says think tank Coin Center executive director Jerry Brito, “Issuing a cryptocurrency is not going to help Venezuela escape sanctions.”